Question: Why do Govt workers need anything more than Social Security? Why are we providing teacher pensions where a school admin in Niles IL receives a $30+ Million pension? Why do they not follow suit with the private sector and convert all defined benefit plans to defined contribution... Give the workers a 401K instead of adding unlimited liability to the tax payers? Same with their health plans... Why would they need any health benefit better than a medicare equivalent? According to PBGC.com there are less than 1500 private pensions left with over 10,000 participants and they are already bailing out and covering Delphi and a bunch of others. How do us tax payers get on the hook for insuring private company pensions? If the company goes bust there pensions should go bust. Seems like the smart career is just to jump jobs with companies and entities that have massive pension benefits. Can none of these actuaries do basic math or comprehend these pension plans are a ponzi scheme?
Pocket, your questions answered: Why do Govt workers need anything more than Social Security? For the same reason that you, or anyone else, needs more. SS is designed to be a survival pension, nothing more. It's great benefit is that because of the shared risk feature - common to all defined benefit plans -- less has to be contributed per month to guarantee a certain payout that can't be outlived. This is a huge advantage to the low wage worker who has virtually no disposable income. If you allow people to opt out of social security you shrink the size of the risk pool and have to increase contributions accordingly. Why are we providing teacher pensions where a school admin in Niles IL receives a $30+ Million pension? (There is no answer without more information. You didn't give a reference, but whenever you read something that sounds absurd, it likely is wrong. see for example: http://niles.suntimes.com/news/schools/pension-NIL-12122013:article) Why do they not follow suit with the private sector and convert all defined benefit plans to defined contribution... Give the workers a 401K instead of adding unlimited liability to the tax payers? If the only consideration was to protect taxpayers, there would be no publicly backed pension plans. It is true, public defined benefit (DF) pension plans for the public's employees leave the public -- the taxpayers -- on the hook, in the same way that private DF plans leave the employer on the hook. That is one reason private employers are ditching defined benefit plans and moving to 401Ks instead. This shifts risk from the employer to the employee. Individual 401Ks have higher costs and no risk sharing, but 401Ks with instant vesting of employer contributions (a desirable but uncommon feature) are more flexible and give employees more options than do defined benefit plans with long vesting times-- such as ten years. One the other hand, more must be contributed per month into 401Ks to reduce the risk of running out of money in retirement, since there is no risk sharing. Defined benefit plans, if the risk pools are large enough, when conservatively managed and if vesting times are reasonably short, are vastly superior on average. Many employers are too small to independently manage their own DF plan. They do have options beyond individual 401Ks however. The best possible plan, on average, for everyone, would be a DF plan on top of social security, with portable, flexible contributions, a huge risk pool not tied to any employer, conservatively managed, broadly invested, well insured, and with pensions strictly based on contributions and not weighted to give somewhat higher ROI to low income participants -- as S.S. is. So I guess the best answer to your question is that, indeed, taxpayers could be spared the risk of public pensions going bad by moving public employees to 401Ks. (Wall Street would love that!) But on the other hand, public employees, because they constitute an enormous risk pool, provide the ideal situation for DF retirement plans. Such plans can also be a benefit to us taxpayers because there are typically, at the State level, many relatively low income public employees. We would, I am assuming, have to pay these low wage workers more if we expect them to be able to build 401K portfolios. We have the choice of retaining a DF Retirement plan for our public employees at lower cost and low risk to the taxpayer, but not zero, or shifting all risk and somewhat higher cost to the employees. It's clear, in my mind anyway, that for public employees a DF retirement plan is best, but I am assuming we would have to pay our low wage workers more if we shifted them to 401Ks. Same with their health plans... Why would they need any health benefit better than a medicare equivalent? Medicare is pretty good. Too bad congress does not give it free reign to control costs. But remember this, you pay your entire working lifetime into medicare. Then when you retire and began to draw medicare benefits you will likely pay for medicare supplemental insurance -- unlike social security contributions, your medical insurance premiums don't stop with retirement, they just go down. So in effect, you've prepaid for much of your health care in old age. While you were young and healthy you handed your health insurer a nice plum by paying all those big health insurance premiums (or your employer did on your behalf) on top of your medicare premiums. The insurance companies took care of all the young healthy people and medicare all the old and sick people. You helped make your insurers very happy on the way to the bank. Then when you retired you helped out your insurance companies a bit more by buying supplemental health policies to cover the 20% that medicare doesn't cover plus part of your drug costs. The U.S. is the land of opportunity for medical insurers, that's for sure. If everyone, even the young and healthy, fell under medicare, the total medicare premium would have to go up a lot, but it would certainly be considerably less than the combination of medicare premium plus private insurance that we all pay now. That's why there was support, outside of Congress of course, for single payer, with the insurance companies offering supplemental insurance to cover what medicare doesn't. But within Congress and the White House there was a strong push to "bring the insurance companies on board", and we all know what that euphemism means. According to PBGC.com there are less than 1500 private pensions left with over 10,000 participants and they are already bailing out and covering Delphi and a bunch of others. How do us tax payers get on the hook for insuring private company pensions? If the company goes bust there pensions should go bust. Some would say the Company Principals, then the equity holders, then the bond holders, and finally the pension fund insurer should be on the hook, in that order. In the U.S. we decided to have taxpayer-backed, pension fund insurance. It's a matter of opinion, of course, whether that's a good idea. It is, in any case, the law. Seems like the smart career is just to jump jobs with companies and entities that have massive pension benefits. Why not just stay with a company you like that has a "massive pension benefit"? Good luck with that by the way. Can none of these actuaries do basic math or comprehend these pension plans are a ponzi scheme? No legitimate pension plan, including social security, is a "Ponzi Scheme." Actuaries tell us what the probability of this or that is if we do this or that. When we follow their recommendations, the probability is high that things will go right. We haven't, however, always paid attention to them. For example, the social security actuaries have been calling for an increase in the social security contribution rate to adjust for changing demographics. Initially it was two cents on the dollar earned (one cent each, employee and employer). Congress, true to form, has ignored them for a number of years. Sometimes I get the feeling that Congress is more interested in wrecking social security then they are in making it work.
Unions exchanged votes for cushy salaries and pension contracts from elected politicians. The public, being idiots, didn't mind the shop. And that's how we got here. Ideally, the best model is Detroit - let cities and states go bankrupt. As such, pension contracts are broken and retired workers get in line behind secured creditors. As to whether that will actually happen nation-wide, as opposed to a Federal Reserve bailout of the pension system, is up for debate. That's what Argentina did, if I'm not mistaken. Either way, America is about 3 years from Greece. Perhaps closer. Economically, the debt which fueled this bogus recovery will soon hit it's limit. Then all bets are off. And I share your outrage. Public worker compensation is ridiculous. Why should 3 private sector workers go without, so one bureaucrat can retire early, with a huge pension and benefits, at the taxpayers EXPENSE. What makes them God? Or royalty? Nothing.
well as many are saying here-adapt or die. if you can't fight them-join them. get a gvt job and ride the wave! i'm not paying a dime for SS tax,cause all my profits are from trading and i'm fully expect that, when it will be my time to retire-i will be covered regardless. i'm going to give all my money away to my children and will be poor and homeless,according to my tax returns. just like those russian jewish grandmas in NE Philly, who never worked a day in US, collecting all possible and impossible benefits,including free apartments,food and medical experiences..benefits that 90% of Americans doesn't even know that they are exist. that was my retirement plan
You got to look deeper into this sham. Typical pension enters into securities lending agreements pledging 10% of their equity assets with their custodian bank. Their sold on the buy and hold strategy and to loan the bank securities for 1% interest. They lose all transactional benefit... they get 1% and take all downside risk. These lending agreements are for institutions only and are essentially a 1% perpetual option that is marked to market each day. If the equity goes down in value the interest goes down.. Really doesn't matter as it allows the borrowers to make massive transactional profit and transfers trading risk to the pension. These guys actually pay them massive fees on top of giving them a ridiculous loan. They could make 10% writing options on the assets they hold each quarter but instead let the banks get the transactional value and sit and do nothing but pay fees and earn unconscionable interest on massive loans. Got to look at a few of their cafr's cause this sham is so obvious and apparently legal. Banks have some damn good lobbyists... Banker math is not the same as us. $2+$2 = $1 for you and $3 in bank fees. You got one state that paid 18 money managers $30m to lose $4B! Another one loans $100M in securities for $51k in interest... None of these pensions are underfunded... they are being systematically ripped off by their fiduciaries in a high stakes con game with bull shit transparency. They publish audited financials that might as well be printed on rolls of charmin. Virginia sued Bank of NY Mellon for $1B and settled for $28m in a currency scam. The bank was settling all currency transactions at high and low of day and pocketing the difference. The fact that these pension trustees trust the foxes to guard the hen house and count the eggs and have no capabilities to audit in real time should be a financial crime. They are typically at the top 1% of public comp and hide been lawyers and burn pension funds defending their acts when they are complicate in setting up and approving these shams. Re: School Administrator Pension: http://www.edlawyer.com/images/4110017_R23.pdf http://www.championnews.net/?p=6399 http://grumpyelder.com/2012/02/pension-costs-for-illinois-top-100-teachers-approaches-1-billion/ http://www.zerohedge.com/news/2013-...harged-not-disclosing-structural-underfunding Even Maverick74 posted this here before: http://www.elitetrader.com/vb/showthread.php?t=218044&pp=6
Just as I thought! Normally one quotes an annual pension, but if you want to get some really big numbers assume, that some high paid administrator will live to be a 100 in a defined benefit plan, and then quote not his annual pension plus COLA, but the total pension received after 35 years of retirement. That can generate some real gee whiz numbers. If you're going to pay someone nearly a million a year in salary during their working years, you can expect them to earn a very nice pension, On the other hand if the guy drops dead from liver cancer 6 months after retirement his estate gets only his own excess contributions back. All of the States share of money contributed towards his retirement pension stays in the system to supplement the pensions of those who who don't get liver cancer and live much longer than their actuarial death age. That's the way most State DF plans work. And they work quite well when they're well managed without political interference and corruption. I guess we are not talking about Illinois here.